At the end of 2023, the Canadian economy and the financial markets were still feeling the after-effects of the coronavirus pandemic.
Read: Expert panel: How interest rates impact DB pension plans
Some key questions remain heading into the new year:
- Is price inflation finally on a path towards returning to the Bank of Canada’s target rate of two per cent over the next couple of years?
- Since the beginning of 2022, the Bank of Canada has raised its policy interest rate 10 times in order to combat price inflation. Is this tightening cycle nearing its end and could the policy rate even start to decrease in 2024? Also, what are the implications and risks to the Canadian economy if Canadian and U.S. monetary policies diverge in 2024?
- Will the end result of the Bank of Canada’s actions to reduce inflation be a deep recession or will the Canadian economy be able to pull off a soft landing?
- Long-term bond yields increased dramatically in 2022 and much of 2023. However, long-term yields decreased meaningfully from the beginning of November to the middle of December 2023. Is the recent drop in yields the beginning of a trend towards lower yields or does it reflect only short-term volatility that will soon…
